The latest twist sets up Thursday as a crucial moment in the yearlong trade war with potentially huge ramifications for companies, markets, consumers and politicians in both nations: With a US ultimatum now overhead, will Liu offer enough concessions to stave off higher tariffs or will Chinese authorities play hardball and respond with retaliatory measures? Trump administration officials accused China of reneging on commitments made during weeks of negotiations. It's normal for both sides to have differences. Banks have also taken heavy losses.

"Week after week, we've heard there has been progress and that a deal would be reached", said Kate Warne, investment strategist at Edward Jones. "That in our view is unacceptable", he said, adding that significant issues remain unresolved, including whether tariffs will remain in place. Apple fell 2.7 per cent. Bond prices also rose as investors sought out other ways to reduce risk. The losses in USA equities were considerably higher, as the S&P 500 index dropped by 1.7 per cent. The index had been down 648. The Nasdaq fell 175 points, or 2.2%, to 7,947.

The S&P 500 fell 48 points, or 1.7%, to 2,883.

Trump had initially set the tariff increase to 25 percent on $200 billion worth of Chinese goods, including internet modems and routers, printed circuit boards, vacuum cleaners and furniture, in January.

The US will increase tariffs on 200 billion dollars' (179 billion euros) worth of Chinese goods to 25 percent on Friday, the White House confirmed on Monday.

Helfenbein said he predicts many of his association's members could soon flee from doing business in China, adding, the major problem is how "locked" in the retail industry is with China. That expectation helped boost the stock market's rally this year. Chiefly, the Federal Reserve promised to take a patient approach with interest rates. That would extend penalties to everything China ships to the United States, its biggest foreign customer. He has used the threat of tariffs as a weapon in trade talks with many nations.

"We've basically flipped from being too pessimistic to perhaps being too optimistic", he said. Markets had expected a U.S. "They weren't expecting it, but they do want to get a deal done and sending their top negotiator means that they're serious about that".

And there is the suggestion that graphics card manufacturers could be the ones to suffer the most. Tech and industrial companies, which import a range of components and other parts from China, would feel the biggest impact from raising tariffs on Chinese imports, according to UBS.

Energy futures closed mostly lower.

Meanwhile, oil prices extended their losses on Tuesday, with West Texas Intermediate having now declined by almost US$5 a barrel, or 7.4 per cent, over the past two weeks.